By Dele Sobowale

“We’ll no longer augment shortfalls” – FG. PUNCH, September 16, 2013.

Just in case public sector workers fail to get the point, the Federal Government went further to declare that “only actual earnings will be shared.” Again for those who might not understand the meaning of that statement, it means that the Federal Government will no longer dip into the excess crude oil to make up the difference between budgeted earnings and actual income. Typical of governments everywhere, the Federal Government failed to tell the entire story – perhaps because it might be too alarming. Yet, the truth must be told to enable public servants, at all three tiers of government, as well as creditors to government to prepare for the inevitable. And, what is inexorable?

The Excess crude oil account which had been used to cushion the impact of declining revenue is almost depleted. The facts of our economic life have finally caught up with the illusion that all is well. The consequences are predictable. They include but are not limited to: delayed payment of salary and other entitlements as well as late payment to contractors for goods supplied and services rendered. Any way you look at it, the party is over.

Governments throughout the federation are heading for the lean months; and perhaps years. Many governors who had set a blistering pace in expenditure will find themselves unable to meet the minimum requirements of governance which is payment of salaries as and when due.

For once, the blame should not entirely go to Jonathan and the Federal Government. States which will find themselves in financial difficulties should share the blame. Most states have appointed Commissioners of Finance whose sole responsibility is to collect allocations from the Federal Government; hand the funds to the Governor to spend or steal any amount he chooses and to pay bills – including salaries, entitlements and whatever percentage of outstanding debt they want.

It is doubtful if any state government has a department which conducts studies to determine the direction of crude oil prices and revenues and project forward in order to advise the government if current levels of expenditure will be sustainable. The attitude has always been “There is more where the last supply of funds came from.” Well, the Federal Government has just announced that there will be less where the last came from.

The highly indebted states will feel the pinch most because a greater percentage of their revenue is tied to loan repayments – mostly deducted at source. For those states, what will be left will hardly cover recurrent expenditure; so capital spending will cease for the balance of the year – if care is not taken. As the Chinese had taught the world, “a picture is worth a thousand words”.
But, for the sake of those not versed in the “dismal science” called economics, let me help to draw some conclusions, which should help those not in government to dismiss the falsehood those in government will attempt to circulate.

First, with seven months in the year gone, and the eighth month not much better than the previous seven, the 2013 budgets presented by the Federal and virtually every state government, are in shreds. None is worth the paper on which it is written. As a collateral damage, the projections for 2014, in the three years rolling plan, should also be thrown into the dust bin. Unless the Federal government can stop the theft of 400,000 barrels of crude oil daily, next year’s budget is already “dead before arrival”.It is difficult to imagine on what basis the Federal Minister of Finance will present a budget which fails to take into account the realities we now face.